Micron Reportedly Wins Exclusive Right to Bid for Elpida

Micron Technology has reportedly won exclusive rights to acquire Elpida Memory and will have to pay for the company $2.5 billion or even $3.75 billion. The acquisition of Elpida will make Micron one of the world's three largest makers of dynamic random access memory (DRAM) and will have a dramatic effect on the industry as a whole.

The two companies yet have to confirm their intentions officially and reveal a plan how will the new Micron utilize assets of Elpida, such as manufacturing capacities, and what kind of advantages will the new international memory conglomerate have when compared to other makers of DRAM and NAND flash memory. What is clear even now is that with loads of memory types in portfolio, Micron will be more competitive against Hynix Semiconductor and Samsung Electronics.

Big Enough to Challenge Samsung

Looking at Q1 2012 revenue market share figures combined by DRAMeXchange (a division of TrendForce), Micron and Elpida came in third and fourth with 11.6% and 12.4% of the market, respectively, still a good distance behind second-place maker SK Hynix, who controlled 23.9% market share. After Micron and Elpida have integrated, their combined market share will bring the Micron team’s market share (Micron, Inotera, Elpida, and Rexchip) to nearly 24%, surpassing SK Hynix’s 23.9% to become second only to memory giant Samsung. As DRAMeXchange has previously stated, the DRAM industry is heading towards becoming an oligopolistic market – the emergence of three major DRAM players will help DRAM chip price gradually stabilize, bidding farewell to the price-slashing market competition of the past.

After Micron acquires Elpida, the Micron alliance will combine the DRAM capacities of major Taiwanese, U.S., and Japanese makers. The new team will be able to go up against the Korean heavyweights in terms of both commodity and mobile DRAM.

Technology Portfolio to Ensure Financial Stability

Looking at process technology transition, Elpida is not far behind the Korean makers in either yield rate or migration speed for both commodity and mobile DRAM. The Japanese supplier’s 30nm process yield rate is nearly mature, while the 25nm process is in the testing phase at Elpida’s Hiroshima fab. Elpida subsidiary Rexchip is expected to begin testing on the 25nm process in Q3 2012, and its mass production schedule is the same as its parent company’s. Elpida’s performance in the mobile DRAM sector is impressive as well – according to TrendForce, the maker’s mobile DRAM revenue market share already reached 8.8% in Q1 2012. Cooperation with Micron’s flash memory team would turn Elpida into an even more formidable opponent in the mobile DRAM sector.

Looking at Micron, the maker has always had close ties with first-tier PC OEMs in terms of commodity and server DRAM, its NAND flash products are ialso competitive. Micron and Elpida’s integration will be beneficial in terms of both product diversification and capacity increase – the adjustments will help improve the oversupply situation that has long plagued the DRAM industry. Together, Elpida’s mobile DRAM products and Micron’s NAND flash chips can be used to produce MCP (multi-chip packaging) products, which will help increase entry to mid-level smartphone market penetration rate, thereby significantly improving cost structure and profitability for the makers.

Taiwan Makers to Benefit from Merge

As for Taiwanese DRAM manufacturers, Micron’s acquisition of Elpida’s commodity and mobile DRAM technology will be a boon to Taiwanese memory makers. If Nanya and Inotera have access to Elpida’s technology, the makers will be able to speed up migration to the 25nm process. With the Taiwanese manufacturers’ strong manufacturing capabilities, they will be able to quickly begin mass production and lower cost structure. If the tri-national alliance is successful, not only will the makers have a chance to take second place in the global DRAM revenue ranking, but it is estimated that their total capacity will exceed 400 thousand wafer starts per month, or 40% of DRAM industry capacity. The team will become the third DRAM heavyweight, and the DRAM industry will be dominated by three major players.